The Forbes family, former owners of the eponymous US business publication and related brands, is suing the new Hong Kong owner of the assets just 14 months after selling them.
Forbes Media Holdings, Forbes Financial Management, and family-owned financial company Highlander Management accuse Integrated Whale Media Investment of breaching the payment terms on a loan linked to the original acquisition, according to a copy of the court filing seen by FinanceAsia on Tuesday.
If the lawsuit is successful it could force Integrated Whale into a court-mandated insolvency and lead to another round of bidding for the media assets.
Integrated Whale is a Hong Kong-based but British Virgin Islands-registered investment company founded by Yam Tak Cheung. In the original press release outlining its acquisition of Forbes Media, Integrated Whale was described as being “primarily engaged in public and private investments, with expertise in telecommunications, media and technology.”
The company beat out other bidders to buy Forbes Media for an undisclosed amount from the Forbes family and private equity group Elevation Partners on September 12, 2014. Sources familiar with the deal place the agreed sum at $475 million for a 95% stake. The remaining equity is believed to have remained in the hands of the Forbes family, which continues to hold two seats on Forbes Media’s board of directors.
According to the lawsuit filing, large parts of which were redacted at the request of the plaintiff and accused, Integrated Whale took loans in the form of promissory notes from Highlander as part of the acquisition agreement.
The plaintiffs accuse Integrated Whale and its principals, including Yam and Wong Siu Wa, of failing to make the very first interest payment on these notes when it fell due on October 1, 2014.
The notes were slated to fall into default if any interest payment was not received within five working days after the agreed payment date. Under the terms of the acquisition agreement the lenders could then demand immediate repayment of the entire principal of the notes plus extra costs such as legal fees.
Integrated Whale is believed to have taken a lot longer than the five-day grace period to make the original interest payment. According to the lawsuit, the Hong Kong company ignored the demands for repayment "by any means necessary, no matter how improper." This led Forbes Media Holdings, Forbes Financial Services, and Highlander to demand repayment of the entire loans.
The lawsuit also claims Integrated Whale used its position as a controlling shareholder of Forbes Media to “embark on a retaliatory, multi-front campaign of oppression through the abuse of the corporate machinery to penalise and dissuade the Forbes plaintiffs from enforcing their basic contractual rights.” Details on the exact forms this oppression took were redacted.
Integrated Whale released a statement on Tuesday denying the charges: "The management of Integrated Whale Media Investment rejects the allegations contained in the complaint as completely without merit. IWM is currently reviewing all legal options regarding the complaint and reserves its rights."
The statement added the dispute would not impact the daily management or operations of Forbes Media.
The Forbes plaintiffs filed the lawsuit against Integrated Whale in the Court of Chancery in Delaware in the US on October 29. Additionally, they have also entered litigation against Integrated Whale in the BVI. If the BVI court rules against Integrated Whale it could be placed into liquidation.
The original sale of the Forbes Media assets gained interest from several media groups in 2014. Integrated Whale won out after offering the highest bid.
The original press release regarding Integrated Whale’s successful bid in July 2014 said it “will provide capital, as well as financial and operational expertise, and intends to leverage its international relationships to strategically enlarge Forbes Media’s reach on a global scale.”
A US-based lawyer representing the Forbes plaintiffs declined to comment on the case. A US-based lawyer representing Integrated Whale did not respond to emailed requests for comment immediately before press time.